Is Bitcoin Mining Destined for Data Centers?

For many, Bitmain’s recent announcement of the realization of a major data center in northwestern China served as a reminder of the level of mining centralization in Bitcoin. Although the Beijing-based company will not own the entire complex, and the whole facility will not necessarily be dedicated to bitcoin mining, in theory over half of all hash power securing the Bitcoin network could be concentrated in a single data center.

For some, this is reason for concern. If bitcoin mining is dominated by one or even several data centers, these could represent a single point of failure — something Bitcoin was specifically designed to avoid.

Much of Bitcoin’s future may therefore depend on a reversal of the trend toward further centralization. And there is reason to believe the trend may indeed reverse.

Centralization Concerns

In 2009, the first year of Bitcoin’s existence, there was little difference between running a node and mining. The typical Bitcoin-Qt wallet allowed regular users to invest spare CPU power to try and earn some coins.

By the end of that year it was first suggested that GPUs — mining with video cards — could be more effective. In response, Bitcoin’s inventor asked users